Manglam Yarn Agencies vs Asstt. Commr., Commercial Taxes

Vineet Kothari, J.—The question of law which was framed for consideration in the present revision petition filed by the assessee is as under:

Whether the exemption notfn No. 1490 dated 17.9.2001 (SO No. 183) issued u/s 15, RST Act exempting sale or purchase of all kinds of man-made fibers and man-made yarn to which the rate of tax in respect thereof exceeds 2% also covered the turn-over tax imposed on the respondent-assessee u/s 13A of the RST Act, 1994 or the said exemption is limited to the individual sale or purchase of the specified commodities in the said notfn.

The Revenue Authorities, all three, concurrently held against the petitioner-assessee that the notfn dated 17.9.2001 did not cover the turnover tax payable by the assessee u/s 13A of the RST Act, 1994 (hereinafter referred to as ''the Act'').

Before coming to the controversy and case laws, it is considered expedient to reproduce provisions of the Act and exemption notification and rate notification in question for ready reference:

13-A. Levy of turnover tax.-(1) Every registered dealer and every dealer who is liable to get himself registered u/s 3, and whose total turnover in a year exceeds three lacs rupees, whether or not the whole or any portion of such turnover is liable to tax under any other provisions of this Act, shall be liable to pay turnover tax, from such date and at such rate as may be notified by the State Government but not exceeding ten percent of his gross annual turnover.

(2) No tax under Sub-section (1) shall be payable on that part of turnover which relates to:- (i) sale or purchase of exempted goods;

(ii) sale or purchase of goods in the course of inter-State trade or commerce;

(iii) sale or purchase of goods in the course of export out of the territory of India or sale or purchase in the course of import into the territory of India;

(iv) all amounts collected by way of tax under the provisions of this Act or the Central Sales Tax Act, 1956 (Central Act 74 of 1956);

(v) all amounts allowed to dealers in respect of goods returned to the dealer when goods are taxable on sales provided that the goods were returned within a period of six months from the date of delivery of the goods and the accounts show the date on which, and the amount for which, refund was made;

(vi) all amounts realised by a dealer by the sale of his business as a whole; and except as provided above, no other deduction shall be made from the gross turnover of a dealer for the purpose of this section.

(3) For the purpose of assessment, collection and refund of tax levied under this section, the provisions pertaining to assessment, collection and refund under other provisions of this Act and Rules made thereunder shall mutatis mutandis apply.

Exemption of tax.-Notwithstanding anything contained in this Act, where the State Government is of the opinion that it is necessary or expedient in the public interest so to do, it may, by notification in the Official Gazette, exempt fully or partially, whether prospectively or retrospectively from tax the sale or purchase of any goods or class of goods or any person or class of persons, without any condition or with such conditions as may be specified in the notification.

The relevant notification providing for rate of turnover tax of 0.25% dated 30.3.2000 and notification dated 17.9.2001 exempting the rate of tax on all kinds of man-made fibers and manmade yarn exceeding 2% subject to certain conditions, are also reproduced hereunder:

1[S. No. 1333] : F.4(1)FD/Tax Div/2000-301 dated 30.3.2000

S.O.377.-In exercise of the powers conferred by Section 13A, RST Act, 1994, the State Govt. [.1.], hereby notifies that every registered dealer and every dealer who is liable to get himself registered under the Act and whose total turnover is not less than 2[fifty lac rupees] in a year, shall be liable to pay turnover tax under the said section, at the rate of 0.25%.

1[S. No. 1490] : F.4(18)FD/Tax Div/97-Part-III-92 dated 17.9.2001

S.O.183.-In exercise of the powers conferred by Section 15, RST Act, 1994, the State Govt. [.1.], hereby exempts from tax sale or purchase of all kinds of man made fibers and man made yarn whether synthetic or non-synthetic, collusosic or non-cellulosic, blended or not and waste thereof, worsted and semi-worsted woollen yarn including carpet woollen yarn, embroidery yarn, cotton yarn and cotton yarn waste, to the extent to which the rate of tax in respect thereof exceeds 2%, 3[on the condition that these commodities are used as raw material for manufacture of fabrics in the State.]

The principal submissions made by the learned Counsel for the petitioner-assessee Mr. Dinesh Mehta are as follows:

(a) That since the exemption notfn dated 17.9.2001 came after the turnover tax rate notfn dated 30.3.2000 providing for 0.25% turnover tax, the exemption notfn dated 17.9.2001 should be deemed to have an overriding effect and the rate of tax on sale of all kinds of man made fibers and man made yarn including the turnover tax cannot exceed 2% and, therefore, the turnover tax levied by the AA and upheld by the appellate authorities up to the Tax board is wrong in law and the same deserves to be quashed and set aside.

(b) That turnover tax in effect is also a tax on sale or purchase of the commodity and, therefore, the notfn dated 17.9.2001 would cover that also.

(b) Since the word ''tax'' has been defined in Section 2(41) of the Act as any tax or other levy by any name leviable under the provisions of the Act and ''turnover tax'' has not been separately defined, therefore, ''turnover tax'' is included within the definition of ''tax'' u/s 2(41) of the Act and is governed by the notfn dated 17.9.2001.

(c) That since Section 13-A(2) of the Act stipulates that no turnover tax shall be payable in relation to sale or purchase of exempted goods, therefore, the exemption over 2% rate of tax granted under the notification dated 17.9.2001 cannot be indirectly taken away by imposition of turnover tax u/s 13A of the Act.

(e) That since the Hon''ble Supreme Court in S. Kodar v. State of Kerala (1974) 34 STT 73 as well as this Court in Merta Trade & Industries v. State of Rajasthan and Ors. (2002) 13 STO 462 (Raj) held that turnover tax is nothing but tax on purchase or sale of goods and is as good as additional rate of tax on such purchase or sale of the goods, therefore, the exemption over 2% of rate of tax under notification dated 17.9.2001, would exempt the assessee from levy of turnover tax also.

(f) That the judgments of Hon''ble Supreme Court in Sun Oil Company (P) Ltd. v. State of West Bengal (1998) 111 STC 420 upholding the decision of West Bengal Taxation Tribunal in Kejriwal Electronics Pvt. Ltd. v. Commercial Tax Officer (1991) 81 STC 20 (WB) [FB] and over ruling the decision of Single Judge of Calcutta High Court in the case of ABN Food and Beverage Pvt. Ltd. Vs. Assistant Commissioner of Commercial Taxes and Others, was distinguishable from the facts of the present case since exemption provisions contained u/s 4AA in West Bengal Act referred to only Section 4 for exemption whereas Section 15 of the Rajasthan Act without reference to any specific provisions for levy of tax, empowered the State Government to exempt fully or partially the assessee from payment of tax on the sale or purchase of any goods, and, therefore, the exemption in the present case under the notfn dated 17.9.2001 exempted the assessee from turnover tax also.

(g) that relying on the decisions of the Hon''ble Supreme Court in Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner of Commercial Taxes and Ors. (1991) 83 STC 234 and Union of India v. Wood Papers Ltd. (1991) 83 STC 251, the learned Counsel for the. petitioner-assessee urged that while interpreting the taxing statute including the exemption notifications, the Rule of interpretation to be adopted is that while strict interpretation has to be given to decide the question whether the subject falls within the exemption or not but once exemption is held applicable, full play to such exemption clause has to be given:

The choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the Legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning is not manifest on the plain words of the statute. If the words are plain and clear and directly convey the meaning, there is no need for any interpretation. It appears to us the true rule of construction of a provision as to exemption is the one stated by this Court in Union of India and others Vs. M/s. Wood Papers Ltd. and another, infra : 1991 JT(1) 151 at 155:

True, speaking, liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject foils in the notfn or in the exemption clause then it being in nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notfn then full play should be given to it and it calls for a wider and liberal construction....

The learned Counsel for the petitioner-assessee submitted that exemption under notfn dated 17.9.2001 cannot be narrowly construed and would also cover exemption from turnover tax.

These submissions are opposed by Mr. V.K. Mathur appearing with Mr. Rishab Sancheti in the following manner:

(a) That the notfn dated 17.9.2001 exempts only individual transactions of sale or purchase of all kinds of man made fibers and man made yarn from the rate of tax exceeding 2% subject to condition of the same being used as raw material for manufacture of fabrics in the State and subject to further condition of manufacturer giving certificate in prescribed form appended in the said notfn and, therefore, the same does not include the turnover tax leviable on the gross annual turnover of the assessee in the year.

(b) That event of taxation for levy of tax on sale or purchase on each transaction is different from levy of turnover tax on the gross annual turnover exceeding a particular limit of turnover and these two being different concepts, cannot be mixed up and, therefore, the Revenue Authorities have rightly held the assessee is not entitled to the exemption from turnover tax under the notfn dated 17.9.2001.

(c) The words ''on'' is absent before the words ''sale or purchase of all kinds of man made fibers and man made yarn'' in the notfn dated 17.9.2001 and, therefore, the turnover tax which is levied on gross sale value or turnover of the assessee during particular year cannot be covered by the said exemption notfn and the said notfn clearly exempts only individual transaction of sale or purchase from tax exceeding 2% rate subject to condition of certificate of the commodity being used as raw material for manufacture of fabrics in the State, whereas the turnover tax on the basis of gross annual turnover as determined u/s 13A of the Act on which the turnover tax at the rate of 0.25% was leviable if the turnover exceeded Rs. 50 lacs in a year.

(d) That the controversy was longer res Integra and was covered by the decision of the Hon''ble Supreme Court in case of Sun Oil Company v. State of West Bengal (supra) and, therefore, the present revision petition filed by the assessee deserve to be dismissed as being without force.

I have heard learned Counsels at length and given my thoughtful consideration to the controversy in hand and also the judgments cited at the Bar.

While it is true that the turnover tax is nothing but tax on turnover viz., aggregation of sale or purchase of goods and is, therefore, exigible with reference to Entry 54 of List II of Seventh Schedule to the Constitution of India, but the exigibility of the turnover tax is upon happening of different kind of taxable event. It gets attracted when the gross annual turnover exceeds a particular limit or bench mark. The character of tax remains the tax on sale or purchase of goods, but the levy is attracted if the criteria of its levy is fulfilled as defined in Section 13-A of the Act. The whole of the turnover does not attract the turnover tax. The exclusion of turnover mentioned in Section 13A(2) has to be made viz., turnover of exempted goods, turnover of goods sold in the course of inter-State trade or commerce or in the course of export out of India etc. The levy of turnover tax is also subject to restrictions imposed under Article 286 of the Constitution of India and Sections 14 and 15 of the CST Act as held by this Court in Merta Trade & Industries'' case (supra) but the question is, can. rate of turnover tax prescribed in the notfn dated 30.3.2000 at 0.25% on the taxable turnover as determined u/s 13A of the Act exceeding Rs. 50 lacs, be further slashed down by implied exemption by a subsequent notfn about the rate of tax in relation to sale or purchase of-all kinds of man made fibers and man made yarn under notfn dated 17.9.2001. The answer has to be in the negative. The reason is that notfn dated 17.9.2001 which in fact reduced the rate of tax applicable on the said commodity to 2% or in other words granted exemption from rate of tax in excess of 2% on the individual transaction of sale or purchase of the said commodity subject to fulfillment of conditions specified in the said notfn itself. The said notfn issued u/s 15 of the Act which is the only source of power available with the State Govt. to grant exemption does not refer to tax leviable u/s 13A of the Act. As rightly contended by the learned Counsel for the Revenue there is no intendment about tax, there is no equity about tax. On a plain reading of the notfn as per golden rule of the interpretation i.e., to go by the plain language of the text of the notfn, one can only come to the conclusion that the said notfh dt. 17.9.2001 operates in a different field, whereas the levy of turnover tax u/s 13A operates in another field. If the State Govt. wanted to exempt turnover tax u/s 13 A also, nothing prevented the State Govt. from issuing such separate notfn or to mention it specifically in the same notfn also. The exemption under notfn dated 17.9.2001 is available with reference to individual transaction of sale or purchase only, is further fortified by the certificate appended in the said notfn as a condition for grant of exemption, which certificate can be given by the purchasing dealer only in respect of individual sale or purchase of goods. There is no concept of implied exemption or exemption by stretching exemption notfn to cover the turnover tax also whereas the same is not clearly exempted under the said notfn dated 17.9.2001. As is well-known on the other hand, the taxing statutes including the exemption notfn have to be strictly construed and plainly read. On a plain reading of the notfn, it does not appears to the Court that the State Govt. has exempted turnover tax also under the said notfn dated 17.9.2001.

As a matter of fact, the similar kind of controversy which was dealt at a great length by the West Bengal Tribunal in Kejriwal Electronics Private Ltd. ''s case (supra), the controversy has been finally decided by the Apex Court in Sun Oil Company''s case (supra) in the following manner:

In the West Bengal Sales Tax Act, 1954, the Legislature itself has clearly and unambiguously referred to the two forms of impost, one u/s 4, which is referred to as "a tax" and the other u/s 4-AAA, which is referred to as "a turnover tax". The difference in nomenclature is consistently maintained in those as well as other sections of the Act. u/s 4-AA which provides for exemption, the empowerment to notify that no tax shall be payable relates to "tax" levied u/s 4. Therefore, notfn No. 1809/F.T. dated 1.4.1976, issued u/s 4-AA obviously refers to the tax u/s 4 and not to "turnover tax" imposed u/s 4-AAA. A small-scale industrial unit is not entitled exemption from payment of turnover tax during the period of the validity of the eligibility certificate by virtue of the notfn issued u/s 4-AA. Kejriwal Electronics Private Limited & Co. v. Commercial Tax Officer (1991) 81 STC 20 (WB) [FB], approved. ABN Food and Beverage Pvt. Ltd. Vs. Assistant Commissioner of Commercial Taxes and Others, overruled. Decision of the West Bengal Taxation Tribunal in Sun Oil Co. Pvt. Ltd. v. State of West Bengal (1994) 93 STC 24, affirmed

Another judgment which was relied upon by the learned Counsel for the assessee in the case of Additional Commissioner v. Arihant Industries (2002) 127 STC 419 is also of no avail to the petitioner assessee. The learned Single Judge in that case held that the words used in the notfn "exempts from tax" on a plain reading of the notfn indicated that the women entrepreneurs in tiny sectors have been exempted from the payment of tax under the Act. The word ''tax'' has been defined u/s 2(r) which means tax leviable under the provisions of the Act. The sales tax is leviable u/s 4 and Purchase Tax is leviable u/s 11 of the Act and thus, the exemption notfn refers to all tax leviable under the Act which includes Sales Tax as well as purchase tax. The said judgment did not touch upon the controversy in hand at all. As already observed the turnover tax leviable u/s 13A is not the same as sales tax or purchase tax leviable on the individual transaction of sale or purchase. It is a levy on the basis of gross turnover of the assessee exceeding a particular limit and treating the class of dealers, who have turnover over that particular limit as a different class, the legislature has imposed turnover tax u/s 13A of the Act. "The constitutional validity of the turnover tax was upheld by the Hon''ble Supreme Court in S.Kodar''s case itself (supra). The judgments of Supreme Court in Manglore Chemicals and Wood Paper''s case (supra) in this context help the case of Revenue more in the present case rather than the assessee.

Thus, this Court finds no force in the contentions raised by the learned Counsel for the assessee that the turnover tax imposed upon the assessee should also be deemed to have been exempted under the notfn dated 17.9.2001 and nothing beyond 2% on sale of all kind of man made fibers and yarn could be imposed in the face of the said notification. The said notfn, in the considered opinion of this Court does not cover and exempt turnover tax leviable u/s 13A of the Act and the said turnover tax imposed at 0.25% under notfn dated 30.3.2000 is neither hit nor eclipsed nor cut by the subsequent notfn dated 17.9.2001.

The revision petition of the assessee is thus, found to be devoid of merit. The same is accordingly dismissed. No order as to costs.

1 S. No. represents Serial No. of Part II of the book by J.K. Jain & Prasoon Jain

2 The turnover was reduced to Rs. 30 lacs by notfn F.4(18)/FD Tax Div/2000 dated 24.4.2001 [S No. 1464]

3 Subs by notfn dated 22.3 2002 dated 22.3 2002 for,

on the following conditions, namely:

That these commodities are used as raw material for manufacture of fabrics in the State ; and

That such manufacturer shall issue to the selling dealer a certificate in the Form appended to this notification.

CERTIFICATE

I, ... (Name)...(Status) authorised to make purchase on behalf of M/s...(Name and address of the purchasing dealer), do hereby certify that the...(description of goods) purchased from M/s. ...complete address of the seller), holder of R.C. No. ...(RST)...(CST), as per cash memorardum/bill No. ...dated....will be used as raw material for manufacture of fabric in the State of Rajasthan.